The clouds that hung over the financial-technology industry in 2024 appear to be clearing as interest-rate cuts, recoveries in fintech stocks and promises of a looser regulatory environment in the second Trump administration paint a more promising outlook for startups.
After capturing a windfall of investment during the period that followed the Covid-19 pandemic, the fintech industry’s vast crop of startups across payments, lending, consumer banking and other categories faced a challenging adjustment period. As venture-capital funding dried up, some fintechs cut their spending through layoffs and more-focused product strategies. Others with significant war chests held onto valuations that now appear to have been inflated during the frenzied funding period.
These factors all combined to stall deal activity, slow growth and inspire laments of a “fintech winter.” For 2025, however, industry insiders are optimistic that the tide will turn and momentum will build around new technologies like stablecoins and that capital raising, acquisitions and public listings will begin to pick up.
Here are three fintech themes to watch in 2025:
Relaxed Regulation
The bankruptcy of banking-as-a-service startup Synapse Financial Technologies Inc. left thousands of fintech customers without access to funds held in accounts that were, in some cases, advertised as protected by the Federal Deposit Insurance Corp. The debacle has put partnerships between banks and fintech startups in the regulatory hot seat and accelerated a wave of enforcement actions against so-called sponsor banks which partner with fintechs to enable them to offer financial products. The current administration has responded with a slate of enforcement actions, proposed rule changes and public guidance.
Yet even before the Synapse disaster, FDIC Chairman Martin Gruenberg stoked the ire of policy groups like the American Fintech Council, which argues that his agency adopted a “regulation by enforcement” approach, stifling innovation in the banking industry. Similarly, the Consumer Financial Protection Bureau has long been accused of regulatory overreach. Its recent moves have included claiming oversight of digital wallets peddled by large technology companies and probing fintech firms including PayPal Holdings Inc., Affirm Holdings Inc., Klarna Group Plc and Block Inc.’s Afterpay.
That all stands to change under the incoming administration. Donald Trump’s advisers have sought to shrink or eliminate bank regulators, including the FDIC and the CFPB, the Wall Street Journal reported. Elon Musk, co-lead of the initiative dubbed Department of Government Efficiency, or DOGE, issued a call to “Delete CFPB” in an X post. President-elect Trump supports DOGE and has the power he needs to fire CFPB director Rohit Chopra, if nothing else. Other financial regulators expected to be replaced include the FDIC’s Gruenberg and the acting head of the Office of the Comptroller of the Currency, Michael Hsu.
“It will have an immediate impact on tone, and you’ll have a relatively swift change in terms of the experiments people are willing to do, the things they think about prioritizing,” said Amias Gerety, partner at QED Investors and former acting assistant secretary for financial institutions at the U.S. Treasury Department. “At the same time, most financial institutions try to chart a reasonable course so they don’t have to change their business significantly when regulatory attitudes change.”
Deals, Deals, Deals
The bounce-back of publicly traded fintech companies following steep declines from 2021 peaks has stoked optimism that opportunities for public listings are on the horizon. The Ark Fintech Innovation ETF rose about 34% in 2024. Buy-now, pay-later firm Klarna and neobank Chime Financial Inc. have filed for initial public offerings, setting the stage for other fintechs to follow suit. Stripe Inc. and Plaid Inc. are two other closely watched IPO contenders.
“You can see the fog lifting from the market,” said Matt Streisfeld, general partner at fintech investment firm Oak HC/FT. “As you head into the backend of 2025 and early 2026, you can see public windows open.”
While the public market sentiment is more promising, only a handful of private fintech firms are scaled enough that they would be able to confidently weather the transition. Meanwhile, fintech venture funding has slowed to pre-pandemic levels.
For startups that don’t want to take the public leap and hit a wall in the private markets, being acquired by a larger player may be the most appealing path. Last year, personal finance platform MoneyLion Inc. was acquired by Gen Digital Inc. for $1 billion. In 2025, investors are expecting to see similar deals take shape.
“The scale you need to go public — revenue-wise and from a profitability standpoint — it’s not $100 million anymore, it’s multiples of that and many companies aren’t at that point yet,” said Neil Kapur, partner at fintech investment firm TTV Capital. “We anticipate seeing more strategics flushed with cash on their balance sheets coming to market and being more aggressive about making acquisitions.”
Meanwhile, for those looking to raise more venture capital, there are signs the clouds may continue to clear. Parafin, a fintech startup run by former Robinhood Markets Inc. employees, last month raised $100 million in a late-stage round that may signal renewed investment in a category that has struggled to navigate the dry-up in VC funding. The financing comes at a $750 million valuation for Parafin, which offers loan products, spend management and savings tools to sellers through marketplaces including Amazon.com, Walmart Marketplace, DoorDash and TikTok Shop.
Crypto Payments Go Mainstream
One month after Donald Trump won the presidential election, Bitcoin passed the $100,000 level for the first time ever, likely buoyed by the pro-crypto attitude of the president-elect. Trump’s favorable attitude toward crypto extends to him getting in on the action himself by promoting his own project, World Liberty Financial.
The incoming administration’s pro-crypto agenda is likely to put wind in the sails of efforts to utilize technologies like stablecoins, especially for those trying to expand internationally. Payment processor Stripe’s $1.1 billion acquisition of stablecoin issuing startup Bridge, for example, was motivated by a desire to build global payments infrastructure, Stripe CEO Patrick Collison wrote in an X post announcing the deal.
“Where stablecoins are most interesting today are in crossborder payments, especially in countries or between countries that are viewed as moderate to high risk by the US and European financial institutions,” QED’s Gerety says.
Similarly, PayPal announced that it would enable disbursement parters to use its own stablecoin, PYUSD, to settle crossborder transactions on its international money transfer service, Xoom. PayPal also already allows consumers to buy, hold and sell cryptocurrencies through their wallets. The problem of cross-border payments is attracting startups, too. YellowCard, a stablecoin startup that traded more than $3 billion worth of crypto in 2024, was founded to find a way around costly international wire transfers.
While early movers like Stripe and PayPal are acting on crypto’s momentum, others in payments are waiting for a regulatory green light before making their own investments. Under the new administration, those hesitations may begin to fade.
“From where we sit today, the regulatory situation is still too murky for us to invest aggressively in stablecoin infrastructure,” said Jack Zhang, co-founder and CEO of Airwallex, a global payments platform. “Though stablecoin payments are not currently a burning priority for our customers, there are a number of areas we’re exploring for product market fit. Stablecoins have the potential to disrupt a number of cross-border use cases – such as globally distributed payroll – and we want to be there when the regulatory structure and customer demand align.”
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